Former Bitmain Chip Designer Takes On Crypto Mining Goliath

Yang Zuoxing, one-time chip designer for Bitmain Technologies, left the company in 2016 after a disagreement with co-founders Jihan Wu and Micree Zhan

Yang claims his crypto chip company, MicroBT, is as good, if not better, than Bitmain

He’s considering filing for an IPO to tap public equity markets that includes market competitors Ebang International Holdings Inc. and Canaan Inc.

Yang Zuoxing, former chip designer for Bitmain, is taking on a massive challenge—fighting an uphill battle against his former company, the world’s most dominant provider of crypto mining chips.

Leaving Bitmain Technologies and Forming MicroBT

Yang claims he helped design Bitmain’s market-leading technology. However, after his request for a stake in the company was turned down by co-founders Micree Zhan and Jihan Wu, he decided to leave the company. This was in June of 2016. Just a month after, he started his very own crypto chip company, MicroBT.

In an interview, 45-year-old Yang said “We compete in every area.” He also claimed that MicroBT’s mining gear is just as good, if not even better than Bitmain’s.

Challenging Bitmain’s Dominance

Yang’s company, MicroBT is among the latest to have challenged Bitmain’s dominance in the specialized crypto mining chips market. Despite the digital assets selloff this year, Frost and Sullivan predicts a growth of more than fivefold in the specialised crypto mining chips market. This translates to as much as $17B by the year 2022.

Bitmain’s dominance in the market is undeniable. In fact, the technology giant controlled at least three quarters of the market in 2017. However, many analysts including Mark Li of Sanford C. Bernstein said Bitmain can lose its technological edge. If market competitors like Yang’s MicroBT gets more market shares, it can complicate Bitmain’s objective of raising billions of dollars in a Hong Kong IPO.

MicroBT’s Quest to Take On Market Goliaths

To date, MicroBT has already raised an estimated $22 million from individual investors. Yang claims the company is also tapping institutional money managers in China to secure additional funding. He is also looking into filing for an IPO in 2019, competing with rival Ebang International Holdings Inc and Canaan Inc. in a race to tap public equity markets.

Yang also shared one of the primary selling points he pitches to investors: MicroBT has no exposure to Bitcoin Cash, the cryptocurrency that has experienced a shocking 60 percent tumble this year. Bitmain, an avid and vocal supporter of Bitcoin Cash is believed to be a major holder.

In their IPO filing, Bitmain disclosed a staggering $103 million crypto assets impairment in the first half of 2018 but the company did not provide any breakdown of its holdings.

To date, Bitmain still maintains a massive financial edge over MicroBT. In their IPO filing, it reported a total earning of $743 million in sales in the first half of 2018. MicroBT on the other hand reported a total earning of $186 million (and $48 million in profits) in the same period.

However, Bitmain’s dominant lead may not last. Bernstein’s Li noticed one blatant sign competitors like Yang’s MicroBT are catching up: Bitmain made a $253 million writedown on unsold inventory in the first half of 2018.

Yang acknowledges Bitmain’s technology is great. However, he maintained, “ours is too.” He also added they will continue to work on upgrades so they remain competitive even if Bitmain rolls out new products

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